Friday, February 6, 2009

What Krugman Said - Updated

Update: The "center" holds, and still the blood-dimmed tide is loosed.

As an aside, I am increasingly impressed with the historically extraordinary role Paul Krugman is playing. In a media and blogospheric landscape covered by pygmies, he towers. He has a lifetime's expertise and the authority of his Nobel Prize -- and, in making such powerful use of his bully pulpit, he is bringing both to bear in the most thoughtful, deeply serious way imaginable.

12 comments:

Well, I'd say that Krugman is speaking half-truth. He seems to suggest that massive government spending, any spending, is what's called for. He's so tied to his Keynesian hobby-horse that I don't get the sense that he really cares about how the money is spent. And that, I think, contradicts the essence of your two previous "FDR" posts.

The obvious middle here, which is where I think most of America would land on, is large short-term stimulus that's directly tied to job creation, and long-term strategic investments in infrastructure etc. Unfortunately, the laundry list of items that are neither fish nor fowl overwhelms the bill as it stands now.

But the real problem here isn't the mish-mash aspect of the bill. That's a red herring, imo. The real problem -- which is what Krugman has been writing consistently about -- is that (a) tax cuts, the mindless faith of the right, don't work for this situation; they don't get money into the economy as effectively as simply putting it in via government investments; and (b) we're out of monetary solutions; like Japan in its economic collapse in the '90s, we can't play the Fed games any more, because the interest rate is zero. Krugman has been making that macro point. True, he doesn't have religious convictions as to how the money should be spent -- other than, yes, it should be stimulative, create jobs. But it's not an accurate reading of what he's been writing to say he's just a cavalier spender. And... if we're talking about hobby horses, I'd say Keynes looks pretty good now, compared to Milton Friedman.

Could it be more perfect? Sure. But, again, as Krugman has been arguing, the main point here is to have the correct order-of-magnitude understanding of the problem. The fine-tuning of the car's engine or its chrome is less important than making sure it can hit highway speeds.

I got dismayed with all the earmarks that got put in by David Obey, even though they all seemed worthwhile expenditures, because I didn't want this to get bogged down in a political battle. So I expected the Senate to play grownup to the House's 2-year horizon...only to see their first version even more larded up than the House version. And the tax cuts make no sense, but I get why those are in there, to try to get votes (fat lot of good that did). But now the "centrist" Democrats and Republicans are working to strip out anything that they can't understand as "job creation" -- moving the bill from a "stimulus package" to a "job creation package."

I think the initial efforts at bipartisanship were fine and probably the way to start this out, coming so close on the heels of the inauguration -- if only for it to allow the Republicans to show their true colors even as the economy tanks. (Colbert, lauding GOP House members: "If we can't have a perfect bill to stimulate the economy, you'd rather have no economy at all!")

The president's own remarks yesterday to House Democrats would seem to presage Krugman's column this morning: "So then you get the argument, well, this is not a stimulus bill, this is a spending bill. What do you think a stimulus is? That's the whole point."

And yet: http://krugman.blogs.nytimes.com/2009/02/07/what-the-centrists-have-wrought/

Meanwhile, our favorite shark-pack pilot fish has picked up the smell of blood in the water: http://www.nytimes.com/2009/02/08/opinion/08dowd.html?adxnnl=1&ref=opinion&adxnnlx=1234069948-tiRSL1iXPW9Cco2gRnrzig (Though you'd think that this kind of word-soup compulsive punner would at least acknowledge that her headline is stolen from Barney Frank.)

As I've said earlier, what Krugman has been doing consistently is to base his arguments on facts and substance. The data he cites are credible, non-partisan data. The basis for his theoretical argument is history, not just hypothesis. And it's credible theory, I believe, not Laffer Curves and other forms of voodoo. And the basic facts are the basic facts. The economy is going off the cliff, and tax cuts are dead -- sorry, here I go being, er, strident -- as a useful strategy. They're the invariable refrain of the right -- talk about maintaining a monolithic analysis that doesn't adjust to the facts! -- and they have demonstrably failed, in a huge way. As the spender of last resort, the government has a duty to do so.

Is Krugman strident? I don't find him so -- but maybe that's just because I agree with him, and I'm certainly capable of going on a rhetorical tear myself. But I'd say that of all the public intellectuals in wide view -- those who have made a forceful effort to explain what's going on and, yes, to frame the debate -- his record holds up pretty well.

And as to whether he's imposing abstract macroeconomic theory in some monolithic way, in contradiction to his own avowed political advocacy... well, I'm now qualified to debate macroeconomics with this Will Wilkinson guy. But I simply and honestly do feel that Krugman -- arrogant though he may be -- is shining an expert and serious light onto public policy that is forcing the debate itself to be vastly more expert and serious.

Let me put it this way: If I happened to have a column in the New York Times, and the fate of the world turned out to hang on a proper understanding of Hamlet, and I saw that the crucial performance of the play was being based on some clearly ignorant and dopey idea of what it was about -- an idea that not only distorted the theatrical realities of Shakespeare's time, but that also based its reading on some myopic (in my humble estimation) understanding of what's going on right now in the culture of the humans... and I didn't say something, didn't forcefully apply whatever knowledge and analysis I have or believe I have to correct that crucial error... then why the hell did Pinch Sulzberger give me the damn column in the first place, I'd like to know?

I'll be generous tonight -- because I thought our president did a very good job in his press conference. More of that, please.

Part of the issue is that Krugman deliberately keeps himself aloof from the halls of power, in order to maintain his freedom of thought and expression. And I'll, er, hope that his analysis -- which is, I think, the same advice he'd give in private -- is having and will have more and more impact. At least, I do believe it's being heard.

"Last but perhaps not least among causes of the consumer funk is the administration’s own determined pessimism. Mr. Bush has a bully pulpit, and he is using it to preach economic alarm. This adds powerfully to the chorus of doomsaying. And when it comes to short-term economics, believing can sometimes make it so."

–Paul Krugman, 2/21/01 (http://www.pkarchive.org/column/22101.html)

Now, I'll admit that Krugman did use the modifier "short-term" economics, and there's little doubt that the present crisis vastly eclipses that of early '01. But still... :)

In order to get out of this mess it will take a unified country. Republican views aren't all crazy. Some tax breaks are necessary unless you want the Gov to run everything and the moderate stimulus is best. Pluswe need real regulation and a stop to ridiculous executive over compensation. But Krugman is on the one side only, his POV is valid, but his practical solutions are not all entirely correct. Obama is trying to walk the razors edge in the most difficult of situations and doing a damn good job of it I say. What he said about lowering the deficit, even with the crisis, is spot on. And Krugman's nationalizing the banks plan is not, I hope, going to happen -

In order to get out of this mess it will take a unified country. Republican views aren't all crazy. Some tax breaks are necessary unless you want the Gov to run everything and the moderate stimulus is best. Pluswe need real regulation and a stop to ridiculous executive over compensation. But Krugman is on the one side only, his POV is valid, but his practical solutions are not all entirely correct. Obama is trying to walk the razors edge in the most difficult of situations and doing a damn good job of it I say. What he said about lowering the deficit, even with the crisis, is spot on. And Krugman's nationalizing the banks plan is not, I hope, going to happen -